Chapter 3 Problems - Solutions(2)

Chapter 3 Problems - Solutions(2) - Chapter 3 Problems Use...

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Chapter 3 Problems Use the following information for Boxware Corporation to answer the next four questions: Sales price per unit $190 Variable cost per unit $ 80 Average production 1,500 units per month Total fixed costs $55,000 per month 1. What is Boxware's contribution margin per unit? Contribution Margin per unit = Sales price per unit – Variable cost per unit CM per unit = $190 – 80 CM per unit = $110 2. How many units per month must Boxware sell in order to break even? Break even = Fixed Costs / CM per unit BE = $55,000 / $110 BE = 500 units Sales – VC – FC = Profit $190X - $80X - $55,000 = 0 $110X = $55,000 X = $55,000 / $110 X = 500 units 3. What amount of dollar sales must Boxware achieve each month in order to break even? Break even sales dollars = BE units * Sales price per unit BE dollars = 500 * $190 BE dollars = $95,000 CM Ratio Approach: CM Ratio = CM / Sales Ratio = $110 / $190 Ratio = 58% BE = FC / CM Ratio $55,000 / 58% = $95,000 4. How many units per month must Boxware sell in order to make a $110,000 profit? Units = (Target Profit + Fixed Costs) / CM per unit
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Chapter 3 Problems - Solutions(2) - Chapter 3 Problems Use...

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